I hold the check game pad key and get the Release Game Key to Continue message.I hold down the X excape key before releasing the check game pad key as directed but all that happens is that the grey "splash" screen disappears and I see all the commands of the system starting. Eventually, it boots completely to the main screen.

If your XO is not "activated" (from charity group) then follow the instructions in the release notes for USB reinstall -- this will update the firmware after the software is installed. All notes are in :http://wiki.laptop.org/go/Releases. You cannot go directly from 656 to 12.1.0. You must first go to 11.3.0 or 11.3.1 .

Do not attempt this if you cannot get the "activation key" back from a USB drive or SchoolServer.